Coming off a pandemic-hit year, Budget 2021 shall be an important and delicate task for the Government. Defence continues to be a priority area given the precarious situation at our Northern frontiers. In addition, the defence budget could be the government’s tool to promote in-country manufacturing, jobs and exports to help the ailing economy.
A lot has been penned down in defence policy framework lately – import embargo, public procurement policy, the release of Defence Acquisition Procedure 2020 and offset guidelines, increase in Foreign Direct Investment (FDI) in defence sector to 74 percent- all focusing on localisation, Atma-Nirbhar Bharat and Make in India.
From Procurement standpoint, the key expectation from this Budget shall be an increased capital budgetary allocation to fast track some of the big-ticket programmes such as Multi-role fighter aircraft, NUH, LCAs, FICV etc.
Tax benefits/incentives such as a tax holiday could give the sector the same incubation period to attract large scale investment and growth as was once provided to infrastructure and telecom sector etc. In addition, wherever the specialised raw materials for aerospace & defence manufacturing are not available, schemes like PLI should be introduced for promoting in-country manufacturing. This could go a long way in helping set-up this extremely capital-intensive industry and promote job creation.
At the policy level, the government needs to work to make defence contracting simpler in order to bring it in line with the best business practices and introduce time-bound procurement process. Norms in relation to value addition